The Second Time Around

By James Kelly

Reagan and Senate Republicans okay a budget, but can it pass?

"We're going to get a budget," exclaimed Senate Majority Leader Howard Baker. "We're well on the way." Baker's enthusiasm may have been a trifle premature. Just a week after negotiations between the White House and Congress on the budget for fiscal 1983 had broken down amid partisan squabbling, a new compromise proposal was hastily approved by Ronald Reagan and the Republican-controlled Senate Budget Committee. Yet no sooner had the White House and G.O.P. leaders reached that accord than congressional Democrats launched a broadside against it. Charged Senator Ernest Rollings of South Carolina, the ranking Democrat on the Budget Committee: "It's Stockman and his gimmickry. These are squishy figures."

The compromise, spearheaded by Pete Domenici of New Mexico, chairman of the Senate Budget Committee, calls for increasing tax revenues by $95 billion and cutting spending by $322 billion over the next three years. Growth in defense expenditures would be slashed by $22 billion. A freeze would be placed on discretionary programs, such as health and education, for a savings of $39 billion. Salaries for federal and military employees and cost of living increases in veterans' benefits and pensions would be frozen in 1983 and then allowed to grow at a rate no greater than 4% annually over the next two years, for a $43 billion savings. The plan also calls for picking up $40 billion in savings from Social Security over the next three years, through unspecified means. Under the plan, the deficit for 1983 is estimated at $106 billion, with the gap narrowing to $69 billion in 1984 and $39 billion in 1985; if Congress took no action, the shortfall for 1983 would be $182 billion, swelling to $216 billion in 1984 and $233 billion in 1935.

The new proposal was quickly patched together last week when the White House concluded that unless Reagan seized the initiative, it would look as if he had completely lost control of the budget-making process. At a White House meeting last Monday, Chief of Staff James Baker bluntly told his colleagues: "We've got 48 hours to put together a Republican alternative." In a meeting between Reagan and twelve Republican members of the Senate Budget Committee, Domenici pushed for an updated version of a budget he had proposed last February. The major problem: Domenici still insisted on freezing cost of living adjustments (COLAs) for Social Security this year. Reagan and his aides quickly dismissed that plan as politically suicidal. "We decided not to touch Social Security for purely selfish political reasons," admitted one White House assistant. "For the good of the economy, it should be adjusted."

On Wednesday afternoon, the Senate Budget Committee unanimously rejected Reagan's original February budget, 20 to 0. Majority Leader Baker then telephoned James Baker to come to his office. The White House Chief of Staff brought along OMB Director David Stockman and two aides, and in 90 minutes a new budget was hammered out. After Reagan assured Domenici of his support, the Senate Budget Committee approved the plan that evening by a partisan vote, with eleven Republicans for and nine Democrats against.

The new budget signals a substantial retreat from the positions that Reagan originally staked out last February. But it also represents a slight toughening of the terms he had been ready to offer in his compromise proposal to the Democrats two weeks ago. The President was then willing to raise tax revenues by $122 billion, instead of $95 billion, and to cut the rise in defense spending by $28 billion, rather than $22 billion. At the same time, Reagan offered to slash spending for discretionary programs by only $35 billion two weeks ago, instead of the $39 billion he is now requesting.

The most controversial element in the new package is the provision for saving $40 billion in the Social Security system. According to Domenici, that figure is the sum needed to keep the system solvent over the next three years; but the Domenici compromise sidesteps entirely the problem of how to reach that goal. As one White House aide vaguely put it, "It could come from Social Security tax increases or reduced benefits." The White House suggested that the solution should be left to a blue-ribbon panel appointed by Reagan last December to study the system. Its report is not due until the end of the year, after the elections.

Democrats on the Hill quickly attacked the Social Security savings plan. "What they are doing is fraught with danger," warned House Democratic Floor Leader Jim Wright of Texas. "I don't know how you take out $40 billion from Social Security without reducing benefits." Added Senate Minority Leader Robert Byrd of West Virginia: "It is mortgaging the economic future of the elderly." Others dismissed the new budget proposal as a meaningless numbers game, since it had no specifics on how new revenues would be raised or which defense program would be cut.

In the Senate, Howard Baker plans to move the budget to a floor vote as soon as possible, and he is convinced that it will pass. The real battle will be in the Democrat-controlled House, where Budget Committee Chairman Jim Jones of Oklahoma will begin putting together his version this week. He has already decided his budget will project the same deficits over three years as Reagan's new proposal, but the details will obviously be quite different.

The White House is not optimistic about striking a bipartisan deal with the House Democrats. Indeed, Reagan at week's end charged Congressmen who opposed the new budget proposal with "obstructionism" and "demagoguery." If nothing else, the White House was relieved to have an alternative budget that not only satisfies most Republicans on the Hill but can also be used to attach blame to the opposition if the economy continues to stagger. "The bottom line is Republican unity," said one Administration aide. "Then we are in a position of attacking the Democrats for blocking the economic recovery." That is a familiar political ploy, and the Democrats themselves have been known to use it. Still, it just might upset those non-political types who thought the bottom line was supposed to be the national good.

--By James Kelly. Reported by Douglas Brew,Neil MacNeil/Washington

With reporting by Douglas Brew, Neil MacNeil/Washington

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